The impact of tobacco taxation on cigarette consumption: a case study of France

Abstract

This thesis investigates the relationship between tobacco taxes and the consumption of cigarettes in France. The goal of this thesis is to determine the impact of the recent successive increases in tobacco taxes on the demand for cigarettes. The basic model of “rational addiction” of Becker et al (1994) is used and modified to construct and test a new empirical model. The study is a time series analysis employing monthly data from February 2000 to December 2005. Results show that the price of cigarettes and therefore, the tobacco taxes have a significant impact on cigarette sales. The price-elasticity of demand for cigarettes in France is found to be elastic and negative, suggesting that the French government can discriminate the consumption of cigarette through an increase of tobacco taxes.